Business Level Strategy

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With WorldCom’s focus on growth through merger and acquisition and with no business

model to guide them, the part of their strategy which included integrating the business

portfolio soon fell by the wayside. WorldCom wanted to build a competitive advantage

by building a large customer base through purchasing and merging with smaller regional

companies and being able to offer services at prices lower than the competition in those

businesses. For example, the basic marketing plan would be to offer services at a 20

percent discount from AT&T to get local people and businesses to switch. The

competitive business arenas were to be in International, Voice, Data and Wholesale. The

service they provided was directed toward the small business owner.

They tried to be better than the competition in three separate, but related, areas: price,

revenue growth, and cost structure. In the early days when they were known as LDDS,

it was fairly easy to do. They would be able to offer subscribers of such competitors as

AT&T and Bell South something they did not have previously—a choice. Their main

objective was to first establish a customer base and then merge with somebody. This type

of competitive strategy mindset continued on even after the company changed its name

to WorldCom, Inc.

Because of the extent of mergers and acquisitions, competition became fierce and due

to the lack of integration at the corporate level, it began to affect the performance of the

business units. Customers would call on a sales force from a number of WorldCom units,

such as UUNET, and see what they had to offer. “The real problem came from the fact

that you were dealing with different sales forces with different billing systems,” as stated

by Chris Fouts, a WorldCom pricing analyst. “It was tough to figure out how to set prices.

The net effect was that we were writing down our own business, because we were

competing with ourselves.” When people within the organization tried to get information

to get a true picture of the company’s position, they were chided as to why they needed

that information and told that they really had no need for it because it did not concern

them. This type of problem manifested itself from a lack of integration at the functional

levels.

Functional Level

As stated earlier, because of the concern and focus on growth of WorldCom, little

attention was given to integrating the business units from the business level on down.

Little did anyone realize that this would soon contribute to WorldCom’s undoing. The

focus had shifted from concentrating on the little things in the early days that got them

to where they were, to not being able to see the overall big picture. The original goal was

to try and get the billing systems to mesh, to get everyone on the same system. While

this strategy is initially sound, as a result of the mergers, problems were being experienced

with serving their customers, and some of the various issues surrounding the

integration at this level were not fully addressed. The systems that were integrated were

those that they wanted to integrate. These were in some parts of Voice, Data, International

and Wholesale. The problems stemmed from that if they were merging only a

customer base, this could be handled. However, if it were more than just a customer base,

they would be primarily at a loss because of the complexity involved. For example, in the

merger with WilTel, the infrastructure for local service was far more complex than that

of long distance. Their failure to manage this aspect properly caused problems at the

business level, which eventually made its way to the corporate level. In a sense, they had

lost control, and therefore they never made any great attempts at integrating the

businesses.

This was reinforced further by Diana Barajon Cole, a former MCI Customer Service

Manager. Her job was to keep track of what her customers wanted. She stated, “because

the services were not coordinated, you could never tell what the customer was being

billed because the systems did not talk to each other. It was a disaster.” This was echoed

further at the executive level when Richard Hudseth stated, “there was no integration.

The situation, (e.g., the discrepancy in performance measures), existed because the

numbers compiled for the general public were not going to work. It therefore became

evident that you must find a way to make them work.” The inefficiencies which existed

at the functional level were being covered up by the aggressive growth strategy being

evolved/enacted at the corporate level. Clearly, things were not going well. The major

question now is: What can be done?